Measuring poverty: How the world counts its poor

What does it mean to be poor across the world? It means different things in different countries depending on the definition of the poverty line-an income threshold below which families are considered poor.

In most of Europe, a family with a net income of less than 60% of the “median net disposable income” — a broad measure of the national average income net of taxes income — is counted as poor.

This would imply that a family in the United Kingdom would be poor if its current net income is less than 250 pounds (about Rs 22,500) a week or about Rs 11 lakh a year.

A poverty line “relative” to the national average also gives an idea about the state of inequality. A sharp jump in the income of the richest will set the poverty line higher by pulling up the national average income.

This could make the poor appear even poorer even though their incomes may have risen.

The US uses a much simpler method. The poverty line represents the basic cost of food for a family multiplied by three. The threshold level is adjusted for inflation every year.

A family is counted as poor if its pre-tax income is below this threshold. In 2011 - the latest year for which data is available - the poverty threshold for a family of four stood at $22,811 (about Rs 11 lakh then). There were 46 million such poor families accounting for 15% of the US population.

Chairman of National Statistical Commission Pronab Sen said the definition of poverty line needs to be kept constant.

“Once you have accepted the definition of the poverty line, you have to stick to it. Any poverty line cannot keep on changing. It should be adjusted only for inflation,” Sen said.

Counting the poor, however, isn’t as organised in developing countries such as India, partly because of a bustling cash economy that makes it difficult to capture income data. Instead, policy-makers rely on data on family spend on essentials such as food, health and basic utilities like electricity.

In India, the national poverty line has been fixed at of Rs 27.2 daily spend for country dwellers and Rs 33.3 for those residing in cities.

Thus, for a family of five, the all-India poverty line in terms of consumption expenditure would amount to about Rs 4,080 per month in rural areas and Rs 5,000 per month in urban areas.

Likewise, in most African countries, the poverty line is defined on people’s ability to spend.

Economists point out that in least developed and middle income countries in Asia and Africa, consumption expenditure serves as a reliable proxy of income, assuming the poorest of the poor people spend their entire earnings on survival.

South Africa had three poverty lines - food, middle and upper - and all three were higher than that of India. The food poverty line in Indian rupees was Rs 1,841 per capita per month in 2010, middle poverty line was of Rs 2,445 and upper poverty line of Rs 3,484.

The per capita poverty line of a rural adult Rwandian in Indian terms comes out to be Rs 892 per month, slightly more than Rs 816 for a person in rural India.

India’s poverty estimates are based on expenditure for buying food worth 1700 calories and also a family’s monthly spend on education, health, electricity and transport.

The estimates, based on the Tendulkar Committee methodology, show that there were 269.7 million people in India — or 21.9% of the total population — that live below the poverty line, a drop of 15 percentage points in seven years.